May 6, 2019

How Instagram Became the New Mall

Go where the customers are - and more frequently than how often they are in stores. JL

Matthew Schneier reports in the New York Times:

“Shopping as a hobby, or as entertainment. That’s an
untapped area of the retail marketplace, especially in mobile.” Fashion and Instagram have been a natural fit, being visually driven and constantly refreshed. 130 million users per month now click to reveal shopping tags in posts. "Given that 80% of people follow a business on Instagram, the desire really is there to shop." Brands in fashion, apparel and beauty have signed on,
including Adidas, Burberry, Dior, Nike, H&M, Zara, Kylie and Kim Kardashian West’s cosmetics line. Instagram will be collecting a fee from transactions completed via its
platform, which makes the tool extremely
lucrative.

Instagram has introduced a tool designed to shore up its hold on shopping. The company will be rolling out an in-app checkout function to users in the United States, a secure and, Instagram hopes, friction-free method for purchasing products onthe app without ever leaving.

At its introduction, 23 brands in fashion, apparel and beauty have signed on as partners, including Adidas, Burberry, Dior, Nike, H&M, Zara, Kylie Cosmetics and KKW Beauty (Kim Kardashian West’s cosmetics line). The tool will roll out to all users in the United States. Additional brands will be added to the beta test throughout the year.

“Given that 80 percent of people follow a business on Instagram, the desire really is there to shop,” said Vishal Shah, the head of product at Instagram. “We just didn’t have the tools in place to help them do that.”

Instagram has been working toward in-mobile shopping since the introduction of its shopping tags in 2016, which allowed users to tap on images of products and be linked to off-platform e-commerce via a pop-up browser window.

The tags, and later developments, including shoppable product stickers for Instagram Stories, have enjoyed some success. According to company figures, 130 million users per month now click to reveal shopping tags in posts, up from 90 million in September.

But the process added steps and, often, frustration. The new system allows users to store their payment details (Visa, Mastercard, American Express, Discover or PayPal) and complete transactions all within the app itself.

Unlike with its outside shopping links, Instagram will be collecting a fee from transactions completed via its platform, which makes the checkout tool potentially an extremely lucrative undertaking for Instagram. Mr. Shah declined to share the fee rate.

“Our primary business remains advertising, and we believe this will be an important driver of that business,” he said. “But you can think of this as a potential new business for us.”

Given what is understood to be a growing interest in commerce and shopping at Facebook, Instagram’s parent company, some have wondered whether the introduction of this functionality presages further extension to come.

Mr. Shah said that, for the time being, payment credentials will be stored only for use on Instagram accounts and will not be usable on Facebook or WhatsApp, the messaging app also owned by the company. He acknowledged that payments on Facebook’s other platforms would be “something we think about in the future,” but he said that it would require a clear opt-in from users.

But fashion and Instagram have been a natural fit, being visually driven and regularly (some might say constantly) refreshed.

“Fashion has always been a really strong vertical for us at Instagram,” Mr. Shah said. “Given the way that fashion industry pushes out new product, there is also an element of newness and seasonality that is really consistent with how people express themselves” on the platform.

And that, the company believes, can be a very good thing indeed for retail, where the now common refrain is that e-commerce has eaten away at bricks-and-mortar shopping. But for all that, Mr. Shah said, the mobile world hasn’t yet offered the kind of digital shopping gathering place Instagram can provide.

“If you were in the mood to shop, or just wanted to see the latest trends and latest fashion, there wasn’t really a good place that was the digital equivalent of the mall,” Mr. Shah said, where you could interact both with brands and with friends. “Shopping as a hobby, or as entertainment,” he said. “We think that’s an untapped area of the retail marketplace, especially in mobile.”

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As a Partner and Co-Founder of Predictiv and PredictivAsia, Jon specializes in management performance and organizational effectiveness for both domestic and international clients. He is an editor and author whose works include Invisible Advantage: How Intangilbles are Driving Business Performance.Learn more...